5 Things to Know About the First-Time Home Buyer Tax Credit

1. $8,000 for new buyers: This tax credit is equivalent to 10 percent of the purchase price of the home with a maximum credit of $8,000.  This credit applies only to first time home buyers and principal residences.  Unlike the $7,500 home buyer tax credit from 2008, this one does not have to be repaid.

2. Definition of a first time buyer: For the purpose of this legislation, a “first-time home buyer” is someone who hasn’t owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you’ve owned a vacation home, but not a principal residence, within the last 3 years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase on or after January 1,2009 and before December 1, 2009 are eligible for this credit. Anyone who bought a home in 2008 will not be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit.  For married couples, it is $150,000 or less. Those earning more than these thresholds may be eligible for reduced credits.

5. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)